Hey, small business owner – congratulations on doing so well that you’re ready to start employing staff. That’s an epic milestone which ought to be celebrated! Before the fun and games can commence, here’s what to do before taking on staff for the first time.

Can I afford to take on staff?

Before you hire anyone, talk to your accountant! Go through the numbers, right down to the smallest decimal, to pinpoint what is reasonably affordable to you right now. Your recruitment wish list might feature somebody with decades of experience and a contact list as long as their arm. Just remember that those people usually comes with a high price tag, and your business might not even be ready for them just yet.

As an employer, your business finances also need to accommodate more than just the employee’s salary, too. Don’t forget to consider things like:

Before committing to any contracts, make sure you’ve covered all bases and how they will impact your cash flow. Use our free online tax calculator to work out how much it costs to employ someone.

Talking of pension contributions, you’ll also need to think about a workplace pension scheme. Read our employer’s guide to auto enrolment for pensions. 

Tell HMRC that you’re about to become an employer

You’ll need to keep HMRC in the loop about your change of status from business owner to employer. Register as an employer up to four weeks before you actually pay your new recruit. It then becomes your full responsibility to make the appropriate PAYE deductions and pay them on to HMRC.

Complete a new starter checklist for each new member of staff, and set them up on your preferred payroll system. You’ll need to let HMRC know of any relevant payments and deductions on or before each payday by making a Full Payment Submission (FPS). Again, a qualified accountant or payroll officer will be able to help you with all of this.

You will need Employer’s Liability insurance

First-time employer 101 – make sure you’ve got some good Employer’s Liability insurance sorted before you even think about setting somebody up with a desk. Employer’s Liability insurance is required to cover you for at least £5 million although most reputable providers extend this to £10 million.

Do all the necessary checks on your new recruit

The first check to carry out before hiring anybody is their right to work in the UK. You could end up with a hefty £20,000 fine if you fail to check that your new recruit is eligible to work in the UK.

Depending on the nature of the role you might also want to carry out:

Our team of friendly online accountants and payroll clerks are on hand to guide you with your new payroll needs. Call 020 3355 4047, email info@theaccountancy.co.uk, or get an instant quote online for outsourcing your payroll.

About The Author

John Atherton

AAT Level 3 qualified, I specialise in providing payroll functions and services for a wide variety of clients and businesses.

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